Former Reagan economist says Trump tax cuts will boost economy

Speaking in San Antonio on Thursday, economist Arthur Laffer predicted a new wave of prosperity from Donald Trump tax cuts.

Speaking in San Antonio on Thursday, economist Arthur Laffer predicted a new wave of prosperity from Donald Trump tax cuts.

Photo: David Hendricks /

Photo: David Hendricks /

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Speaking in San Antonio on Thursday, economist Arthur Laffer predicted a new wave of prosperity from Donald Trump tax cuts.

Speaking in San Antonio on Thursday, economist Arthur Laffer predicted a new wave of prosperity from Donald Trump tax cuts.

Photo: David Hendricks /

Former Reagan economist says Trump tax cuts will boost economy

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Economist Arthur Laffer, adviser to President-elect Donald Trump, predicted a new era of national prosperity under the incoming Republican administration at a speech in San Antonio today.

“We are looking at a manifestation of a revolution that is amazing and profound,” Laffer, a former top economics adviser to Ronald Reagan, told an audience of about 140 people at a speech sponsored by Frost Bank at the Sonterra Country Club.

Laffer is known as a supply-side economist and for popularizing the theory called the Laffer Curve, which is said to demonstrate how lower taxes can boost revenues for governments by stimulating the economy. Laffer, 76, now operates a consulting company and has been playing a behind-the-scenes role in helping form Trump’s economic team since the November election.

At 15 percent, the corporate tax rate would be the fourth lowest in the OECD and would stimulate economic activity.

“It would not lose (tax) revenues. Total receipts would do well,” Laffer said, recalling the reduction of the corporate tax rate in 1986 under Reagan from 46 percent to 34 percent.

Lowering taxes for high-income earners also will stimulate the economy, he said, citing the Reagan administration’s cut in the highest income-tax bracket to 28 percent from 50 percent, and the hike in the lowest income-tax bracket from 12.5 percent to 15 percent. “We were moving toward a flat tax,” Laffer said of the Reagan administration.

“It was the right thing to do. Economics is not partisan, for God’s sake. Nothing is more powerful than prosperity,” he said.

Repeal of the Affordable Care Act will improve the health care system, Laffer said, because an alternative plan will allow transparency in costs and increase competition.

Laffer predicted Trump will have four years to install his economic and tax policies, which Reagan did not have after Democrats regained control of Congress in the 1982 midterm elections.

Twenty-eight Democratic senators will be up for re-election in 2018, but only nine Republican senators. “If you look at Trump’s political risks, they are extremely low,” Laffer said. “Trump will have a four-year political run, which we (the Reagan administration) did not have. Once you get the ball rolling, it will be the biggest and best bipartisan era you’ve ever seen.”

Laffer said Trump shares similarities with Reagan. Reagan also was “not respected” and was called a racist and bigot when he took office in 1980, Laffer said.

But Laffer said he sharply disagrees with Trump’s anti-trade campaign messages. “I am a free-trader. There’s nothing better than free trade. We make things better than other countries,” making exports valuable to the U.S. economy because exports bring in money that pay for imports, he said.

“I’m hoping a lot of the rhetoric will be just rhetoric, a ploy to negotiate a better deal” in trade agreements such as the North American Free Trade Agreement, Laffer said.

Laffer noted that Democratic presidential nominee Hillary Clinton also was anti-trade. “I don’t think protectionism is the way to go. It bothers me. Protectionism is a viral disease among politicians,” he said.

Laffer said he believes Republican leaders in the U.S. Senate and House are pro-trade and would modify any “bad (trade) legislation.”

“Fortunately, we live in a low-tax state,” said public television executive Arthur Emerson after Laffer’s speech. “But Texas also is a free-trade state that benefits from international trade. We can’t be too secure that an economic agenda dealing with international trade, especially with Mexico, can continue (under Trump) to keep San Antonio’s and Texas’ international agenda thriving,” said Emerson, CEO and president of KLRN-TV.

“Regardless of political perspectives, there is a pro-business, pro-consumer momentum that was voted into office across all branches of government,” said Tom Stringfellow, Frost Investment Advisors president. “From Dr. Laffer’s perspective, this momentum will escalate domestic economic growth.”

Laffer has provided economic consulting services to Frost Bank for several decades. He was also scheduled to speak Thursday in Houston and Fort Worth, Stringfellow said.